Canadian COMPETITION LAW

On March 22, 2012, the Competition Bureau issued revised draft Abuse of Dominance Guidelines for public comment.  The Bureau had previously issued updated draft Abuse Guidelines in January, 2009 (the Bureau’s Abuse of Dominance Guidelines have not been updated since 2001).

Generally speaking, under section 79 of the federal Competition Act, abuse of dominance occurs when a dominant firm (or firms) engages in a practice of anti-competitive acts that results in a prevention or substantial lessening of competition.  Canada’s modern abuse of dominance provisions were added to the Act following significant amendments in 1986.

Like other major jurisdictions, in Canada it is not dominance per se that is prohibited, but rather the abuse of a dominant position (Canada does not, unlike the United States, recognize attempted monopolization).

To establish abuse of dominance, the Commissioner of Competition must establish the following elements on an application to the federal Competition Tribunal:

1.  A firm (or firms) is dominant in a relevant market (dominance);

2.  The firm has engaged in a practice of anti-competitive acts; and

3.  The firm’s conduct has resulted in (or is or is likely to result in) a prevention or substantial lessening of competition.

Some of the highlights of the Bureau’s revised draft Abuse Guidelines, which are markedly shorter and more concise that than its previous guidelines, include:

Affirming that market power alone (or high prices) is insufficient to warrant intervention under the abuse of dominance provisions of the Act.

Confirming existing Competition Tribunal jurisprudence in relation to the elements of abuse of dominance (market power, a practice of anti-competitive acts and prevention or substantial lessening of competition).  The Bureau also emphasizes that market power is a necessary prerequisite to abuse of dominance inquiries.

Taking the position that, during abuse of dominance inquiries, the Bureau will “generally afford parties the opportunity to respond to [its] concerns regarding alleged contraventions of section 79 and propose an appropriate resolution to address them.”

Indicating a general preference by the Bureau for settlements by way of registered consent agreements (consistent generally with the Bureau’s departure in recent years away from more informal resolutions, such as undertakings).

Articulating the Bureau’s general use of the hypothetical monopolist test for product and geographic market definition.

Setting out more clearly and concisely than previous guidelines the Bureau’s approach to quantitative and qualitative factors for product and geographic market definition.  This is one of the most appealing refinements in the Bureau’s new draft Abuse Guidelines.

Increasing the previous “bright line” share thresholds for single firm dominance, with the Bureau now taking the position that a market share of less than 35% will generally not prompt further examination (unchanged), that a market share between 35% and 50% may be examined by the Bureau (a stricter standard for complainants than in the previous guidelines, where a market share of 35% or more would have “generally [prompted] further examination”) and that a market share of 50% or more will generally prompt further examination (increased from the previous 35%).

Increasing the share thresholds for joint dominance, with the Bureau taking the position that a combined market share of 65% or more will “generally prompt further examination” (increased from the previous 60%).

Clarifying the Bureau’s position on joint dominance (which has been an issue in the past, particularly with respect to the test for the level of interaction between firms necessary to establish joint dominance).  The Bureau states that parallel conduct by firms is not, on its own, sufficient to establish joint dominance and sets out factors for considering whether unrelated firms should be considered to be jointly dominant, which include collective market share, barriers and evidence of a lack of inter-firm competition.

Discussing the Federal Court of Appeal’s decision in the leading Canada Pipe abuse of dominance case in relation to the second and third elements of abuse of dominance (a practice of anti-competitive acts and prevention or substantial lessening of competition) and the types of evidence that may be used to establish that a firm has engaged in a practice of anti-competitive acts.

Somewhat disappointingly, the Bureau’s revised draft Abuse Guidelines have been amended to remove the previous appendix of summaries of Canadian abuse of dominance cases.  This previous appendix provided a very useful summary of abuse cases, including overviews of the facts, anti-competitive acts and remedies.

For the Bureau’s news release see:

Competition Bureau Issues Revised Abuse of Dominance Guidelines for Comment

For a copy of the Bureau’s revised draft Abuse of Dominance Guidelines see:

Draft Enforcement Guidelines on the Abuse of Dominance Provisions

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